CFPB Compliance Bulletin 2020-02
Last week the Consumer Financial Protection Bureau (CFPB) issued Bulletin 2020-02 regarding the handling of information and documents during mortgage servicing transfers. The bulletin builds upon a 2014 bulletin, Bulletin 2014-01. The earlier bulletin demonstrated what CFPB examiners might review to see whether servicers have maintained policies and procedures reasonably designed to facilitate the transfer of information between transferor and transferee servicers during a mortgage servicing transfer. The earlier bulletin also contained frequently asked questions about the interplay between mortgage servicing transfers and the 2013 Regulation X Mortgage Servicing Rules. Since the release of the earlier bulletin, the CFPB has continued to find issues with servicers’ policies and procedures related to the transfer of loan information and documents during a transfer of mortgage servicing rights. These findings led to Bulletin 2020-02.
As a quick reminder, section 1024.38(b)(4) of Regulation X requires servicers to maintain policies and procedures reasonably designed to ensure:
- Transferor servicers – the servicers giving up the servicing rights in a transfer – timely transfer all information and documents to transferee servicers such that the information is accurate and transferee servicers – the servicers acquiring servicing rights in a transfer – can comply with their obligations to the owners of the loan; and
- Transferee servicers identify information and documents that were not transferred and obtain them from the transferor servicers.
One thing to remember is that this rule does not apply to small servicers. Small servicers service 5,000 or fewer mortgage loans for which they are the creditor or assignee. Mortgage loan here generally means closed-end consumer credit secured by a dwelling.
Bulletin 2020-02 includes examples of practices the CFPB may find satisfy the section 1024.38(b)(4) requirements. Many of the examples focus on things that servicers can do during the planning phase of a servicing transfer before the transfer occurs:
- Coming up with a servicing transfer plan that addresses communication between the transferor and transferee servicers, a testing plan, a timeline of key milestones for the transfer, and a way to escalate any problems that arise;
- Having stakeholder meetings with relevant parties (the servicers, investors, service providers, etc.) to discuss issues and develop transfer plans;
- Clearly delineating servicing responsibilities for things like tax reporting, credit reporting, and other issues;
- Developing testing protocols to evaluate whether the data transferred by the transferor servicer is compatible with the transferee servicer’s systems and validating the accuracy of test data transferred;
- Identifying issues that might affect the accuracy or completeness of the data being transferred or compromise the ability of one or both servicers to comply with applicable law and investor guidelines; and
- Identifying loans in default, foreclosure, and bankruptcy because of the special concerns inherent with these types of loans.
In addition to these pre-transfer steps, the CFPB “emphasize[d] the importance of post-transfer monitoring to ensure that transferred data is complete, accurate and functional for the transferee.” Post-transfer reviews to measure the effectiveness of the servicing transfer plan and determine whether any issues need to be resolved can be one tool to use in gauging the accuracy of the transferred data. The CFPB also suggested monitoring consumer complaints, loss mitigation metrics, and delinquencies to spot any trends that might result from a problem with the accuracy of the transferred data.
The CFPB also noted that there were certain practices that might facilitate compliance with section 1024.38(b)(4). For example, the CFPB explained that the use of uniform data standards like the Mortgage Industry Standards Maintenance Organization standard could make it more likely that transferred data might be compatible between servicers, and the CFPB encouraged servicers to adopt a common data standard. The CFPB suggested that transfer agreements could also be used to facilitate data compatibility by obligating “transferors to provide all the necessary information and documents at loan boarding to a transferee servicer's systems.”
Bulletin 2020-02 briefly pointed out the rule’s document retention requirements and “encourage[d] servicers to adopt strong policies and procedures for maintaining documents and information received in a transfer as part of an overall compliance program.” The bulletin, however, did not get into specifics about what that might look like.
The CFPB also identified information and documents that might present more compliance risk (e.g., PMI information, loss mitigation information, etc.). This seems to suggest that servicing transfer plans and any post-transfer monitoring closely look at this type of information to ensure the timely transfer of accurate information to the transferee servicer.
The bulletin also included an appendix of information and documents grouped by subject matter. The CFPB intends to use the appendix to measure compliance with section 1024.38(b)(4). Servicers can use the appendix to analyze whether their servicing transfer policies and procedures are appropriate considering the complexity and risk of their servicing portfolios.